The ABC's of PCORI Fees

If your church sponsors insurance for church staff, you should have heard about the PCORI fee. If you haven’t heard of it, read on.

The ACA has imposed a fee called the Patient-Centered Outcomes Research Institute fee on health insurance issuers and self-insured plan sponsors to fund comparative effectiveness research. This fee was initially meant to expire for plan or policy years ending on or after October 1st, 2019 but due to an enactment of a federal spending bill at the end of that year, this fee was extended for another 10 years.

The IRS (Internal Revenue Service) has increased the PCORI fee amount for plan years ending on or after October 1st 2020 and before October 1st 2021 t0 $2.66 multiplied by the average number of lives covered under the plan.

PCORI fees are reported and paid every year on IRS Form 720 (Quarterly Federal Excise Tax Return). It is due every year by July 31st, on the year following the last day of the plan. The next PCORI fee for plans ending in 2020 is due on August 2nd 2021. The employers who are covered need to report and pay the fees by July 31st 2020.

In order to calculate the average number of covered lives for this period, the IRS did provide a transition relief related to the PCORI fee calculation as it was supposed to have expired. This transition relief allows issuers and plan sponsors to use any reasonable method to calculate the average number of lives covered for this period along with already existing methods, as long as it was applied at the same rate for the duration of the plan year.

This transition relief however, was not extended for the 2021 plan year and therefore plans and issuers need to use one of the existing methods for calculating the 2021 PCORI fee.

The final regulations require plan sponsors of applicable self-insured health plans to use one of three alternative methods — the actual count method, the snapshot method or the Form 5500 method — to determine the average number of lives covered under the applicable self-insured health plan for a plan year.

To get your insurance questions answered, visit Carriage Trade Insurance and talk to any of their insurance experts (who happen to specialize in church insurance).